The iPod is dying and will die in 2006
Half a year ago I posted a very controversial blog entitled “2006 the Year the iPod died”. We had a lot of comments, trackbacks and found the topic generated a lot of discussion at other blogsites as well. I promised to return to that forecast.
First - let me re-iterate. We, Alan Moore and I, are both big fans of Apple, and we loved the iPod and i-Tunes concepts so much that we made it one of the case studies in our book. A positive case study in every way. We do love this innovation. But unfortunately for the many Apple and iPod fans who shared thoughts with us, this Apple innovation is totally bound to become a niche proposition, exactly like other fantastic Apple innovations like Macintosh computers.
What was the point of my blog “2006 the year the iPod died”?
I didn’t mean that the iPod devices themselves would cease to function, or that Apple would discontinue the product. But I quite clearly said that by 2006 the iPod would shift from the centre of digital music both on portable devices, and as a digital music sales platform. The winner to take its place? Mobile phones playing music. I argued with examples of PDAs vs Smartphones, and stand-alone digital cameras vs cameraphones - in both cases the stand-alone devices were superior technically than the multi-function version of advanced mobile phones, but the mobile phone won within two years. And I argued that during 2006, we will see a dramatically larger population of MP3-player equipped musicphones, with the majority of the users preferring the musicphones to carrying two separate devices, and thus also the sales of digital music to shift to musicphones.
I also pointed out that mobile phones are replaced rapidly (currently every 21 months) and in most markets are subsidised by mobile phone operators. But I made the point that those most into music will carry their white earphones for years to come. Not that all iPods would disappear, but just like the Macintosh in the PC world, the iPod would become a very tiny niche. And that would happen during 2006.
Time for a reality check. How is the world reporting the issue?
Let’s start with the population of devices. Most in the IT related press report the iPod market share only among portable MP3 players, conveniently excluding mobile phones with MP3 players. If looking at “stand-alone” MP3 players, the Apple iPod has about 75% of the total stand-alone MP3 player market (the New York Times March 9, 2006 said it is “Snow White and the 20 dwarfs” in its article about the MP3 player market). How many units was that in 2005? Computerworld, quoting Apple, said in December that a total of 22.5 Million iPods were sold in 2005, up from 4.5 Million in 2004. Obviously the rest of the world’s stand-alone MP3 makers like Creative, Samsung etc sold something in the order of 6 to 7 million stand-alone MP3 players.
The total installed base of iPods was well over 30 million by end of 2005. Separately during 2005, a total of 420 million full-track songs were sold on the internet (most on iTunes), according to the global music industry association, IFPI (and just before anyone complains, yes the American RIAA is part of IFPI) in their report for 2005. Surely that must be fantastic performance and the iPod has to be healthy? It has to, doesn’t it?
No it doesn’t. We don’t argue against a fantastic growth record by Apple’s favourite gadget and the positive spin the Apple PR machine has managed in the press. But now for the significant numbers.
First, devices. So Apple sold 22.5 million iPods. In 2005, the mobile phone industry sold more musicplayer phones. How many? The telecoms industry analyst Informa reported that the total number of MP3 player equipped phones sold in 2005 were… 90 Million. Adding to the existing musicphones, the world’s musicphone sales in 2005 were:
22.5 million iPods
7 million other stand-alone MP3 players
90 million musicphones
...for a total of 119.5 million portable MP3 players. Apple’s market share of devices sold in 2005 is not 78%, it is 18.8%.
Of the total installed base, with about 30 million iPods and perhaps 10 million other MP3 players, there is the total of 118 million musicphones according to Informa, giving a total of 158 million devices. Apple’s market share is 19% of that, meaning that in 2005 its market share stopped growing, and started to shrink.
One nail into the coffin of the iPod.
So part of my prediction has already come true in 2005. How about music sales?
Let’s turn to the IFPI report. They make it quite plain, saying:
Mobile music now accounts for approximately 40% of record company digital revenues.
The report even points out that, only in Japan, the sales of music to mobile phones amounts to $211 million US, about half of what iTunes can do worldwide. We’ve mentioned elsewhere the big success, for example, on the Korean music sales in everything from the CyWorld blogsite as background music, to the Melon music service.
If music sold to mobile phones was already 40% of all digital music in 2005, and in that year four times more musicplayer phones were sold than iPods, this number will turn dramatically against i-Tunes during 2006. Sorry, Apple and iPod fans. This is inevitable.
Another nail into the coffin of iPod.
Well, the iPod is the supreme music device, and it’s so cool. Surely its users love the device so much that this won’t matter. The users will select. Many have new musicphones who don’t care about the feature. We all have features on our phones that we don’t use. But anyone who buys an iPod loves music and the device, and will use it passionately. That is fine. Here is where there is also now new data.
TNS, a research organization, interviewed 6800 adult mobile phone owners in 15 advanced countries including the USA, and found that indeed 10% of them listened to music on a stand-alone MP3 player like an iPod. But already in 2005, almost double that number - 19% of these people - listened to music on a musicphone ranging from the smallest number in the USA of 4% and the highest in Korea 26%. Yes, one in four in Korea listen to music on mobile phones. This surely also reflects the fact that Korean mobile phones are years ahead of those in the USA. (The report findings were reviewed at the Breaking News Blog.)
Before anyone starts to complain that this was a survey of mobile phone users, not iPod users, I do need to pre-empt you on three levels.
One, almost every iPod user has a mobile phone.
Secondly the number of mobile phone users is 2,200 million (2.2 billion) vs about 40 million iPod users today in March 2006. So iPods are quite rare actually when compared with mobile phone users.
And third, every economically viable person on the planet has a mobile phone.
So, in the advanced countries, 19% of adults listen to music on mobile phones, while only 10% listen to music on stand-alone MP3 players like the iPod. It really is “game-over”.
Third nail into the coffin of the iPod.
Let me remind readers: First, I am a fan of Apple and am a fan of the iPod music player and of the iTunes music store. They are great. But I also love statistics and now the relevant numbers are totally against iPod. Already 75% of all MP3 players are on mobile phones. Already 40% of all full-track digital music was sold to mobile phones last year, when most phone makers had not released their major musicplayers like Motorola’s Rokr, Samsung’s 6GB musicphone, Nokia’s N series and SonyEricsson’s Walkman phones. And most relevant of all, already twice as many people listen to songs on their musicphones than those who listen on stand-alone devices like the iPod.
Yes, 2006 is clearly the year the iPod died. You heard it here first. Let’s see how long it will be until the mainstream IT press catch on and start to report the real market share and relevance of the iPod.
Cross-posted from Communities Dominate Brands